Daily Research News Online no. 8036 - TNS Buys Compete, Reports Good Year

TNS Buys Compete, Reports Good Year

March 3 2008

TNS has announced an agreement to acquire online behaviour measurement company Compete, Inc. for US$75m in cash, doubling if targets are met over two years. The company also reported full year results for 2007, with revenue of UK£1,067.7m, representing underlying growth of 5.4%.

Compete's revenue rose more than 50% to $14.9m in the calendar year 2007, but it made a loss of $4.5m as it invested in building its panel and industry expertise.

With the ongoing rise of Internet usage and e-retailing, recent estimates from Morgan Stanley Research and Jupiter Research suggest that 'the US market in which Compete operates will grow from $325 million in 2007 to $500 million in 2009', says TNS.

Compete conducts continuous analysis of 'clickstream' data on the Internet behaviour of almost two million people, weighted to match the US online population. Comparisons are drawn between competitor web sites and those of clients, who buy on a subscription basis, with analysis provided weekly or monthly. TNS aims to integrate this capability with its own panels and custom research to give a rounded picture of how online consumer behaviour affects purchasing decisions, to assist slients' marketing effectiveness both online and offline. Specifically, Compete's profiling and segmentation capability will be built into TNS' 6th dimension access panels, beginning with the 1 million strong US access panel and then expanding internationally.

Today's deal allows for an initial cash consideration of $75m and deferred cash payments of up to another $75m over the next two years, if targets are met.

CEO David Lowden calls the acquisition 'an important move for TNS that builds on our ability to help clients understand consumer behaviour in the new and highly complex digital world.' Lowden says Compete's 'strength lies in its ability to provide competitive analysis of individuals' online behaviour, a rapidly growing section of the market that has enormous potential.'

'In the longer term' he continues, 'we will look at the opportunities to add further value by using our Worldpanel, Retail & Shopper and audience measurement capabilities to integrate data on purchasing and viewing behaviour with internet search and shopping behaviour. We believe this will allow TNS to develop new syndicated and custom products, unique in our industry.'

Donald McLagan, Chairman and CEO of Compete, says Compete's clients will see their ability to measure effectiveness across all their marketing programmes 'greatly enhanced' by the union with TNS.

Compete, whose management team will remain in place, was founded in 2000 and is based in Boston, Massachusetts. At present majority owned by a consortium of private venture capital companies, the company is online at www.competeinc.com.

TNS's full year results for 2007 show adjusted operating profit up 12.3% to £111.7m, and adjusted operating margin up 60 base points to 10.5%. Adjusted EPS was 15.4p, up from 12.7p the previous year. Reported operating profit increased by 38.0% to £102.7m.

CEO David Lowden says the company 'continued to make excellent progress against key objectives'. He adds, 'The growth potential for the market information industry remains strong. With our order book ahead of last year, the group is confident that 2008 will represent another year of good progress.'

Specifically, Lowden highlights:

a good performance in syndicated services, including winning the prestigious BARB (Broadcasters Audience Research Board) contract in the UK, which will run from 2010. In the US there was good progress with new services including strong demand for social media analysis tool TNS MI Cymfony; while in Europe, acquisitions strengthened the firm's news monitoring offering.
major new contracts in key markets for TNS Worldpanel, plus the launch of new speciality panels in Asia and a bigger footprint in Latin America through taking full ownership of LatinPanel International.
continuation of the effort to build global partnerships with major multinational clients, known as 'Global Clients and Sectors'. TNS reports 13% revenue growth from these accounts, which now represent 15% of custom revenue - the target is 20% by 2010-12. The overall global account programme has been extended to 50 clients.
continued focus on a more cost efficient operational infrastructure. In 2007, over 630,000 hours of work were off-shored to lower cost destinations, up 50% on the year.
transition of more surveys to the Internet. The proportion of revenue attributed to online data collection in the custom business is now 25%, making TNS 'by far the largest global provider of Internet research' and giving grounds for optimism about the firm's goal of 40% by 2010-12.

Also in 2007, TNS built on existing retail and shopper services with the acquisition of three specialist consultancies, two in the US and one in the UK; and combined its Media Intelligence and iTRAM businesses in order to exploit opportunities provided by media fragmentation.

Results by Region

Europe achieved underlying growth of 5.8%, with revenue of £687.9m, with the UK performing ahead of the market (revenue £161.9m); France growing well in custom business and benefitting from additional polling work for the French presidential elections (£145.8m); and strong advances in the rest of Europe (£380.2m) especially Germany, Spain, Russia and Eastern Europe.

Underlying growth in the North America region overall was 2.4% (2007 revenue £205.2m) - described as 'a year of rebuilding' and 'ahead of expectations at the start of the year'. TNS says it is 'confident about the growth prospects for that business in 2008'.

In Asia Pacific, Latin America, the Middle East & Africa (ALM), positive market conditions and the firm's strong regional network contributed to overall regional growth of 8.0%, led by China, Korea, Australia and Hong Kong. Overall revenue for 2007 was £174.3m.

Results by Sector

Revenue from the Consumer division rose 3.5% (underlying) to £327.3m with strong performance internationally (and especially in Asia) by Worldpanel. Media had a good year (up 7.5% underlying to £226.2m) winning the BARB contract in the UK (commencing in 2010), as well as tenders in Denmark and Norway and digital audience measurement contracts in the US and South Africa.

Business Services (up 4.6% to £141.1) saw good growth in Financial Services, particularly in Europe and Asia. Technology (up 7.1% to £117.9) saw good underlying growth, driven by Asia and North America. Healthcare performed well in Europe and overall was up 7.7% to £102.4m. Other sectors rose 4.6% to £152.8m, with strong growth in Automotive, Political and Social.

Web site: www.tnsglobal.com.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.